1. M/s. Ballarpur Industries Ltd., the appellants, have their factory at Yamunanagar. On 19-7-74, the Superintendent, Central Excise, SRP Range, Yamunanagar, in his C. No. C.E.-20/Paper/219/74/3041 issued a show cause notice to the appellants demanding a differential duty amounting to Rs. 4,13,564.26 p. pertaining to be the alleged short levy of excise duty relating to the period 1-4-72 to 10-4-72. The notice was issued under Rule 10A of the Central Excise Rules, 1944 on the ground that the concessional rate notified under Government of India, Ministry of Finance, Notification No. 208/67-C.E. dated 8-9-67 was not admissible to the appellants as the concession accorded in the Notification was admissible only to such paper mills as did not have a plant attached thereto for making bamboo pulp. The appellants sent a reply alleging that the show cause notice was time barred. They also urged that the classification lists had been approved by the departmental authorities and, at any rate, they could not be revised retrospectively. They also pointed out that if the department was aggrieved, their remedy was to take appropriate proceedings under Section 35A and that the show cause notice was not justified. The Asstt. Collector by his order No. C. No. V (17) 3/5/74 dated 16-1-75, held that the demand was not barred under Rule 10A read with Section 9(2) of the Central Excises and Salt Act, 1944, and that the appellants did not mention the existence of the Bamboo Plant in the factory which amounted to a suppression on the basis of which they have availed concessional rate of duty. He, therefore, confirmed the demand set out in the show cause notice. On appeal, the Appellate Collector, Central Excise, New Delhi, in his Order C. No. 24-C.E./Appl/CHG/ 75 dated 16-7-76, confirmed the order of the Assistant Collector and rejected the appeal. The Appellate Collector held that it was not a question of classification list but it was a matter which involved short levy due to the fact that the officers concerned did not know whether the factory of the appellants was equipped or not with a plant attached thereto for making bamboo pulp.
2. Shri Narasimhan, appearing on behalf of the appellants, raised the following points:- Firstly, he contended that the show cause notice was issued on 19-7-74 for payment of duty for the period 1-4-72 to 10-4-72 and hence it was barred under Rule 10 of the Central Excise Rules.
Secondly, he urged that the classification lists, having been approved by the competent authorities, cannot be reopened except under the circumstances laid down in Sub-rules 4 and 5 of Rule 173(B). He emphasised that there was no element of fraud involved because the office of the Superintendent, SRP, was located at Yamunanagar itself and the excise staff had been making visits at frequent intervals to the various sections of the paper mills and have witnessed the process of paper manufacture. In any event, he urged that the classification lists could not be reopened and that could be done only by the Central Board of Excise and Customs in exercise of the powers conferred on them in Section 35A. The question of time bar under Rule 10 was also raised. The learned counsel for the appellants also relied on the certificate issued by the Institute of Paper Technology, University of Roorkee, Saharanpur, to the effect that different kinds of chippers would be required in the case of bamboo and wood being used as raw materials for pulp making.
3. Shri Jain, the departmental representative, filed an affidavit of Shri B.K. Bansal, Asstt. Collector of Central Excise, Ambala, to the effect that in the said factory, both bamboo and wood are being used as raw mater lals for manufacturing paper. The Chipper House Unit of the appellants' factory was very much capable of chipping bamboo. According to him, bamboo had been in use in the unit as basic raw material for making paper. The representative also submitted that the question of time bar would not arise as there was a suppression of material facts.
In the classification list filed by the appellants, it was mentioned as follows :- "The said paper, all sorts, is manufactured in the mill and we have no plant attached thereto for making bamboo pulp." Shri Jain urged that this representation was a mis-statement and hence Rule 10A could be invoked by the Department.
(i) Whether the classification lists, approved in accordance with Rule 173B (2) by the Assistant Collector, can at all be revised by another Assistant Collector having regard to Section 35A. Whether revision alone lies.
(iii) Whether the appellants are entitled to the benefit of the Notification No. 208/67 dated 8-9-67.
5. Shri Narasimhan argued that the classification lists having been approved by the Assistant Collector, it was not open to his successor to issue a show cause notice which would virtually result in modification of the quasi-judicial orders passed on the classification lists. In other words, he urged that there was an absolute bar against revision of a quasi-judicial decision after one year, and unless the powers of revision are exercised by the appropriate authorities, the show cause notice will not be valid. He relied in support of his contention on the decision of the Tribunal in Order No. 584/83 dated 20-9-83 ( Nuchem Plastics Ltd. v. Collector of Central Excise, New Delhi) and(Rishi Enterprises, Bombay v. Collector of Central Excise, Bombay). Shri Jain, SDR, on the other hand, argued that there was a deliberate mis-statement by the appellants and hence it was open to the Department to issue show cause notice. The question whether there was a mis-statement would be discussed in the course of the further paragraphs. Suffice at this stage to say that the contentions raised by the learned counsel for the appellants cannot be accepted. Section 35 of the Central Excises and Salt Act, 1944 provides for an appeal to the Collector against a decision or order passed by a Central Excise Officer lower in rank. But we find that Rules 10 and 10A of the Central Excise Rules provide for recovery of duties or charges short-levied or erroneously refunded. Rule 10A accords statutory powers to the Government to recover sums due. In view of these provisions, it cannot be said that an order passed by a Central Excise Officer cannot be reviewed by his successor, especially when it is found that there was a short levy or erroneous refund under the circumstances set out in Rule 10 and Rule 10A. The Order No. 584/83 cited by the learned counsel for the appellants related to a revocation of the approval of classification lists on the ground that the appropriate duty on the UFMP should be approved at 40% instead of 33% as leviable under a Notification. In the course of the ruling, it is observed that a decision could be reopened if fresh facts are brought on record or there is at least a suggestion that while arriving at the earlier conclusion, certain materials or provisions had not been considered and that if they had been considered, a different view might have been taken. The ruling in 1984 E.L.T. 260 was in a case where an appellant contended that a question of classification had not been settled, and those rulings do not apply to the facts of the present case. In the ruling reported in 1981 E.L.T. p. 114 (Gopal Paper and Board Mills v.Union of India, at page 119), it is observed that Rule 10 permits a review when the appropriate authority gives a conclusion that an earlier decision was erroneous and that more duty should have been levied or that no refund ought to have been granted, such error having crept inter alia due to "inadvertence, error, collusion, or mis-construction on the part of the officer," thus the objection that the show cause notice ought not to have been issued does not stand to reason.
6. We have then to consider whether the Notice as issued is not time-barred. Admittedly, the notice was issued in respect of removal of goods from 1-4-72 to 10-4-72. The notice was issued on 19-7-74. On behalf of the Department, it is pointed out that under Rule 10A, the notice would be valid. Shri Narasimhan, learned counsel for the appellants, relied on the rulings reported in 1977 E.L.T. p. 193 (Light Roofings Ltd. v. Supdt. of Central Excise, Kancheepuram and two others), and urged that Rule 10A had been held ultra vires. The learned counsel pointed out that the show cause notice should have been issued only under Rule 10 if the facts amounted to a mis-statement and Rule 10A would not be applicable. We are of the view that the contention of the learned counsel for the appellants should be accepted.
"Rule 10-Recovery of duties or charges short-levied, or erroneously refunded :- (1) When duties or charges have been short-levied, through inadvertence, error, collusion or misconstruction on the part of an officer, or through misstatement as to the quantity, description or value of such goods on the part of the owner or when any such duty or charge, after having been levied has been owing to any such case, erroneously refunded the proper officer may, within the three months from the date on which the duty or charge was paid or adjusted in the owner's account current if any or from the date of making the refund, serve a notice on the person from whom such deficiency in duty or charges is or are recoverable requiring him to show cause to the Assistant Collector of Central Excise why he should not pay the amount specified in the notice.
(ii) The Assistant Collector of Central Excise, after considering the representation, if any, made by the person on whom notice is served under sub-rule (i), shall determine the amount of duty or charges due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined within ten days from the date on which he is required to pay such amount or within such extended period as the Assistant Collector of Central Excise may, in any particular case, allow".
"10A-Residuary powers for recovery of sums due to Government-(1) Where these rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short-levied, or of any other sum of any kind payable to the Central Government under the Act or these rules, the proper officer may serve a notice on the person from whom such duty, deficiency in duty or sum is recoverable requiring him to show cause to the Asstt. Collector of Central Excise why he should not pay the amount specified in the notice.
(2) The Asstt. Collector of Central Excise, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), shall determine the amount of duty, deficiency in duty or sum due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined within ten days from the date on which he is required to pay such amount or within such exended period as the Assistant Collector of Central Excise, may, in any particular case, allow." A close reading of these two rules show that Rule 10A could be operative only when the other Rules do not make any specific provision for the collection of duty. In this case, it is urged that there was a short levy due to a mis-statement by the party in respect of the description of the goods. There has been a short levy because it is alleged that the appellants did not make mention of the existence of a plant for making bamboo pulp. If that fact had been disclosed, the assessment would have been totally different and the exemption claimed under the Notification would not have been accorded to him. Assuming for the purpose of argument that the appellants had not disclosed the existence of the plant, the notice should have been issued under Rule 10 within a period of one year. In 1981 E.L.T. p. 114, it had been held that Rule 10 permitted a review of an assessment or a revision of the order, if the appropriate authority comes to a conclusion that the earlier decision was erroneous. On the facts of the present case, even if there had been mis-construction of law, a notice is covered under Rule 10 and not under Rule 10A. The department cannot also rely on Section 9(2) because there is no allegation in the show cause notice to that effect. The learned counsel for the department urged that the question of ultra vires of Section 10A would not arise because in 1966 S.C. p. 1962 and Supplement II-S.C.R. I 765, the vires of the provision was not decided. But the vires of the Act was not challenged before the Supreme Court and that decision reiterated only the power of the sovereign legislature to make laws prospectively as well as retrospectively. The Supreme Court decision would not support the case of the department. The notice issued under Rule 10 was admittedly beyond time.
7. We are next to consider whether the appellants had suppressed material facts and are not entitled to the benefit of the Notification.
Notification No. 208/67 dated 8-9-1977 exempts the first 1000 metric tonnes of paper, all sorts, cleared by any manufacturer for home consumption during any financial year provided that the said paper, all sorts, is manufactured in a factory having no plant attached thereto for making bamboo pulp. Shri Narasimhan argued that the lower authorities proceeded on an erroneous basis that this factory had been equipped with a plant for making bamboo pulp and hence held the Notification would not apply. According to Shri Narasimhan, the plant installed may be capable of crushing bamboo but only hard and soft woods were being crushed and the benefit of the Notification would be available. In support of his contention, he relied on the affidavit of the Plant Manager filed before us to the effect that the plant was commissioned in 1960 and was basically designed to process hard wood, soft wood, grasses and agricultural residues. It is affirmed that right from its inception it was not designed to process bamboo as raw material for making pulp. He also relied on the technical opinion furnished by the Institute of Paper Technology, Saharanpur, to the effect that the requirement of chippers for wood and bamboo are totally different, especially in design of feed system, number and angle of knives and type of rechippcr to be used. Shri Jain, SDR, on the other hand, pointed out that the Assistant Collector had sworn to an affidavit that in the said factory they were using both bamboo and wood as their raw material for manufacture of paper. He also urged that the affidavit filed by the appellants should not be looked into. He placed reliance on the ruling in A.I.R. 1978 S.C. p. 857.
8. We are of the view that the contentions of the department cannot be accepted. The Supreme Court ruling cited does not apply to the present facts.
The decision is to the effect that the statutory authorities, passing an order based on certain grounds, should not supplement it by fresh reasons in the shape of affidavit or otherwise. It was a case of election petition and has no relevance to the present facts. The affidavit of the Assistant Collector refers to the present position in the factory. That will not help us to decide the matter in issue which relates to the period long anterior. The affidavit of Shri M.H. Pandey, Superintendent, Ballarpur Industries Ltd., indicates that right from the inception this plant had not been used for making bamboo pulp. It is manifest from the particulars furnished by the Institute of Paper Technology that though bamboo and wood are primarily raw materials for making pulp, they differ significantly in their physical and morphological characteristics. Different types of chippers are therefore required for their use. The feed system for wood and bamboo are totally distinct. The energy for chipping and the location of the knives are also different. So it is clear that even though the plant is capable of making bamboo pulp, it was not designed for such a purpose.
Shri Narasimhan also pointed out that the appellants never admitted that they were making bamboo pulp. The Appellate Collector had proceeded on the basis that if the factory is "equipped" with a plant attached thereto for making bamboo pulp, the exemption would not be applicable. Such an interpretation is not called for as the notification refers only to a factory having no plant attached thereto for making bamboo pulp. The term "attached" should be interpreted as a plant designed and in fact used for making bamboo pulp. The mere fact that the plant was capable of being used for making bamboo pulp will not disentitle the appellants to the benefit of the exemption. There has been no suppression of facts. The plant was not used for making bamboo pulp during the visits by the excise authorities in the relevant period. If the plant had been used for making bamboo pulp and the same had been utilised accordingly in the manufacture of paper, normally a notice would have been issued. Under those circumstances, it is clear that there was no mis-statement by the appellants in their classification lists. It is stated that they have no plant attached to the mill for making bamboo pulp. Unless it is proved to be factually incorrect, it is not open to the department to issue the show cause notice. Hence, both on the question of time bar and on facts we are of the view that the show cause notice cannot be sustained. The appeal is therefore allowed.